Irish launch of new report on Big Four and tax secrecy

Report co-author Saila Stausholm and Oxfam Ireland CEO Jim Clarken to speak at event hosted by Matt Carthy MEP.

On Tuesday July 18, Irish MEP Matt Carthy will host the Irish launch of a new report by Professor Richard Murphy and Saila Stausholm, which analyses the role of the Big Four accounting firms in facilitating tax avoidance globally and makes recommendations as to their regulation. Carthy commissioned the study together with other left MEPs on the European Parliament’s Panama Papers inquiry committee.

The public forum will be held on Tuesday 18 July, 12.30-14.30, the European Parliament offices  (12-14 Mount Street Lower, Dublin).

The study, published last week, analyses the size, scope and location of the activities of the Big Four accounting firms – PriceWaterhouse Coopers or PwC, Deloitte, KPMG and EY. It makes a number of findings including that these firms do not accurately report all the jurisdictions they are active in, and that that they are heavily over-represented in tax havens when compared with the population size and GDP of these locations. They make exceptional profits in these jurisdictions. The Irish state is once again identified as a tax haven, or secrecy jurisdiction, in this report.

While each firm claims to consist of networks of legally independent companies, they all in reality have central management organisations under common control. The authors of the report suggest that this structure has been adopted because it reduces the level of legal risk and scrutiny they are exposed to and ensures secrecy on the scale of their operations and the rewards flowing from them.

“Over the past year of our work on the Panama Papers inquiry in the European Parliament we have examined in great detail of the role that enablers and promoters of tax avoidance and tax evasion schemes play internationally. The Panamanian law firm Mossack Fonseca is just one example of this, but corporate law firms, company service providers and tax advisors are critical to facilitating these damaging practices,” Carthy said.

“The Big Four auditing and accounting firms are central players in this ecosystem of tax avoidance, yet they are allowed to operate in secrecy, with no measures in place to deal with obvious conflicts of interest between their provision of both auditing and tax services.

“They are crucial regulators of the global economic system – with the unique role of both regulating multinationals through their auditing role and simultaneously advising these same companies on how to abuse the legal system in order to avoid paying taxes – yet they are subject to minimal public scrutiny and regulation. This situation, and the outcomes it leads to, is entirely unacceptable.”

The Irish MEP explained that the  report calls for the separation of the auditing and tax service roles of the Big Four – “basically a kind of Glass-Steagall Act for these firms”.

The report proposes that the fiction of ‘independent’ networks of companies be rejected and that each of the Big Four are acknowledged as being single corporations under common control , which must apply for a single license to operate in the EU. It calls for the Big Four to publish worldwide group financial statements that includes full country-by-country reporting on the public record.

“GUE/NGL MEPs will be working with others in the European Parliament to ensure that these important recommendations on improving the accountability and transparency of the Big Four are taken into account when the Panama Papers inquiry produces its recommendations, and also when the Parliament considers the Commission’s current proposal around regulating enablers and promoters of tax avoidance schemes,” Carthy said.

The report is called ‘The Big Four – A study of opacity’. It was commissioned and funded by the GUE/NGL (European United Left/Nordic Green Left) MEPs who sit on the European Parliament’s Panama Papers inquiry committee (Committee of Inquiry into money-laundering, tax avoidance and tax evasion). The report was written by Professor Richard Murphy (City, University of London) and Saila Naomi Stausholm (Copenhagen Business School).

See here for an Irish Times article on the report. Join the Facebook event here.